South Africa: Africa Business In Brief Issue: 57

Ghana

Ghanaian president's appeal for West African trade
integration likely to be frustrated by protectionism and poor
transport links

Ghanaian president John Mahama has said the 15 members of the
Economic Community of West African States (ECOWAS) urgently need to
lower tariffs, promote free movement of goods and services, and
deepen integration in order to promote growth.

Mahama, who took over last month as ECOWAS chairman, said West
African nations in particular have struggled with poor transport
links and a dependence on commodity exports. He pinpointed wariness
of greater competition as a primary reason for holding back
liberalisation of trade policy. Many of the region's smaller
nations fear being overrun by the economic might of Nigeria,
Côte d'Ivoire or Ghana, and are too dependent on
"the taxes they collect on goods and services", said the
Ghanaian leader.

One of the few advances so far has been a limited agreement on
external tariffs at a summit in Senegal in October 2013 under the
ECOWAS Trade Liberalisation Scheme (ELTS). Mahama said his
immediate goal as chairman is to ensure all countries allow
duty-free goods under this programme to promote the region as a
free trade area.

Significance
ECOWAS has to concentrate just as much on lifting barriers to trade
as on making regional trade flows meaningful enough to attract
investment. Progress on trade liberalisation is certain to be
piecemeal and hard-fought, given the high degree of regional
governments' revenues on tariffs.

However, improvement of transport links, such as extension of
the railway between Côte d'Ivoire and Burkina Faso, is a
prerequisite for tangible progress in ECOWAS's efforts to boost
regional trade. That railway is optimistically scheduled for
completion in 2017, but many more such road and rail projects are
needed to make ECOWAS a true regional market of 300 million people,
which would then attract investment in manufacturing and
agriculture. Without that, even the limited progress towards free
movement of goods and services that ECOWAS will be able to achieve
will have a negligible effect on West African trade.

Guinea

A Guinean technical committee investigating the acquisition of
two iron-ore mining concessions at Simandou issued a report on 9
April recommending that BSG Resources (BSGR) be stripped of rights
it alleges were obtained by corrupt means.

The rights to the northern half of Simandou were stripped from
Rio Tinto in 2008 shortly before the death of former president
Lansana Conté and awarded to BSGR, which sold 51% of its
stake to Vale – which has not been accused of any wrongdoing
– in April 2010 for USD2.5 billion, after spending USD160
million on development work.

Much of the evidence in the committee report is based on an
investigation by the FBI in the United States in April 2013 when
former BSGR adviser Frederic Cilins was taped agreeing to pay
Conté's fourth wife Mamadie Touré – who
co-operated in the sting – to hand over or destroy documents
sought by the FBI. BSGR maintains that Cilins stopped working for
them in 2006 and he faces four years in prison after pleading
guilty on 7 March to obstructing a criminal investigation. BSGR
insisted it would prove the committee's allegations were
false.

Significance
The clear recommendation by the committee and detail contained
within its report makes it highly likely the government led by
President Alpha Condé will proceed with moves to regain
control of the concession. Although this would give Guinea a basis
for putting Simandou back out to tender, BSGR will continue to
fight its case and said it will pursue international arbitration to
halt the government's "illegal" move. That legal
battle will necessarily be lengthy, so Guinea will need to find a
buyer convinced that BSGR's claim will ultimately fail.

Guinea

Foreign mining firms operating in Guinea have suspended work at
their sites and ordered expatriate staff to leave the country as a
major outbreak of the Ebola virus has spread to the capital,
Conakry.

Cases of the viral haemorrhagic fever, which has a fatality
rate of around 90%, have centred on the remote southeastern region
of Nzérékoré, but it took around six weeks to
identify the disease as Ebola. The death toll in Guinea stands at
84, but new infections have occurred in Conakry, home to two
million people.

Mining companies have said they are much more concerned by
those cases than what was occurring in the southeast. A number of
major iron ore projects are located there, including the Simandou
project, ownership of which is split between Rio Tinto and a
Vale/BSG Resources joint venture, as well as Sable Mining's
Mount Nimba operation. Firms said it is relatively easy to prevent
people entering or leaving mines, but in Conakry local employees
have been told to stay at home, and foreign staff sent on
indefinite leave.

Significance
The high mortality rate of Ebola virus has caused understandable
panic amongst expatriate staff, particularly with infections
emerging in Conakry. The swift geographical spread is also
complicating authorities' efforts to control the epidemic, with
cases also emerging in Sierra Leone and Liberia, close to
Guinea's southeastern border. Those two countries are now
likely to follow the example set by Senegal, which closed its
border with Guinea on 31 March. This suggests severe and prolonged
disruption to the Guinean economy because of transport difficulties
and suspended production.

The biggest impact is likely to come in mining because of the
key role of foreign workers, who will stay away until their safety
can be assured. The production and export of bauxite, of which
Guinea holds a quarter of global reserves, will be disrupted for
months, while the long overdue development of rich iron ore
deposits now faces a further long delay.

Mozambique

Attack on Mozambique's Sena railway unlikely
to herald escalation of Renamo attacks on commercial or military
assets

At around 2100 hours on the night of 1 April, unidentified
armed men opened fire on two trains on the Sena railway line, near
Semacueza, between Muanza and Dondo, Sofala province. Both trains
were en route from Moatize to Beira; one train was operated by
Brazilian mining company Vale, the other by Mozambican Railways
(Caminhos de Ferro de Moçambique: CFM). Both drivers were
injured by gunfire, but rails were not sabotaged and the trains did
not stop.

Vice-Minister of Interior, José Mandra, accused
opposition party Renamo of the attacks in a statement, and media
also reported the incident as Renamo attack. However, Renamo denied
responsibility for the attacks venturing that
"counterintelligence forces" might have staged the attack
to discredit Renamo.

Significance
Renamo could have attacked the Sena line since stepping up its
armed attacks on police and army units in April 2013. The attackers
are likely to have been a group of armed bandits; if they were
Renamo members they were most likely to be acting independently,
reflecting a lack of communication between the party's
political leadership negotiating in Maputo with the government and
small bands of fighters in the bush, but we do not assess an
escalation of attacks as likely.

Small armed groups active in Sofala province are unlikely to
have the capacity to severely disrupt the rail line with improvised
explosive devices or grenade attacks, and the deployment of further
security forces to the area is likely to mitigate risks of further
attacks.

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Contractors and banks intending to enter construction contracts or financing transaction for projects in the Middle East are faced with the questions of the application of Islamic Law and the compliance of certain provisions of their contracts with Sharia.

The High Court of Accra, Ghana delivered a ruling on an application filed by Mr. Chude Mba, seeking an enforcement of the judgment of the Economic Community of West African States Community Court of Justice entered in his favour against the Republic of Ghana.

Africa is rising and so is the interest of investors who are looking for business opportunities on the continent.

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